110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 04/22/2025
ITEM NO: 1
DESK ITEM
DATE: April 22, 2025
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Discussion and Consideration of Direction for the 2025-26 Budget Including Budget Balancing Approaches
REMARKS:
Attachment 3 contains Public Comment received before 11:00 a.m., Tuesday, April 22, 2025.
Attachments (previously distributed with the staff report):
1. Five-Year Financial Revenue Assumptions
2. Five-Year Financial Expenditure Assumptions
Attachment (distributed with this Desk Item):
3. Public Comment
From: Phil Koen
To: Chris Constantin; Gitta Ungvari; Wendy Wood
Cc: Linda Reiners; Matthew Hudes
Subject: GFOA Best Practices - Effective Budgeting of Salaries and Wages - Special Study Session Date: Monday, April 21, 2025 3:48:40 PM
Attachments: www.gfoa.org.pdf
[EXTERNAL SENDER]
Chris,
Since the Staff memo mentions GFOA Best Practices, I have taken the liberty to attach the GFOA Best Practice on Effective Budgeting of Salaries and Wages. This was the best practice the Finance Commission relied upon we made the recommendation to create a vacancy factor of 4.6% when budgeting total salary and wages. I was part of that decision and supported the vacancy factor.
The 4.6% vacancy factor was determined based on a 5 year review of historical vacancy trend and actual expenses vs budget for the Town’s salary and wages. In FY 24, the adopted budget called for total wages of $23.2m with an offsetting $1.7m in a vacancy factor, resulting in $22.5m net budget salary expense. The FY 24 actual salary expense was $21.9m, which was less than the $22.5m adopted net budget.
The vacancy factor in FY 24 achieved what GFOA recommends, namely not budgeting for all positions since not all positions are filled for the entire year. To ignore the historical vacancy factor will certainly result in an unnecessary budget cushion for salary and wages at a time when financial resources are scarce. This leads to a misallocation of the Town’s capital and potentially other critical needs going unfunded.
In closing, in looking over the past 10 years of budget vs actual results for salary and wages expense, there is absolutely no evidence that by applying a prudent vacancy factor to the annual budget for salary and wages the Town is increasing the risk the Town could fill vacant positions. Rather it is just the opposite - it is applying prudent budgeting procedures recommended by GFOA by acknowledging that not every budgeted position is filled for the entire year and thus avoiding misallocating capital and enabling other critical needs to be appropriately budgeted.
Please note these are my personal thoughts as a member of the Finance Commission and I am not representing the entireFinance Commission.
Thank you,
Phil Koen
Member of the Finance Commission
ATTACHMENT 3